Journal of Law & Innovation


The United States is at a pivotal moment for broadband competition, with emerging technologies like 5G fixed wireless and Low-Earth Orbit (LEO) satellites offering high-quality broadband service that can be substitutes for wireline service. LEO satellites, especially, can provide cost-effective coverage for areas otherwise very expensive to reach. Despite the quality of these services, the Universal Service Fund (USF), an $8-$9 billion annual broadband subsidy program has traditionally excluded satellite service. NTIA and state regulators also appear ready to severely limit or exclude satellite service from the large new programs designed to eliminate the digital divide. This Article will focus on the impact of the restriction on satellite service even though promoting competition across the board including fixed wireless broadband would also be in the public interest.

While the official rationale for excluding satellite service has been that geostationary satellite services offer higher latency and lower bandwidth than terrestrial options, the more powerful reason is political. Specifically, terrestrial subsidies often benefit rural companies with strong support from congresspeople who are keen to keep funding directed toward their own districts. As a result, the official rationale for satellite exclusion has had to change to exclude new LEO satellites that offer lower latency and higher bandwidth than traditional geostationary orbit satellites.

At the same time that new competitors are entering the market, the U.S. is rolling out unprecedented subsidies aimed at narrowing the digital divide, including over $75 billion for “one-time” broadband infrastructure grants on top of the existing annual USF budget. The government has excluded satellite technologies from nearly all these new (and ongoing) funds. This approach introduces two major risks. First, it limits the cost-effectiveness of subsidies by funneling money into terrestrial projects that could be more effectively covered by LEO satellite services, thereby inflating the average per-location subsidy cost. Second, by disproportionately subsidizing one form of technology, the government hinders market entry for innovative solutions.

Ideally, LEOs and other new technologies should allow the government to phase out universal service expenditures, or at least significantly reduce them. By sidelining these new technologies from subsidy programs, we miss the opportunity to reduce the size of the USF and instead may increase long-term subsidy commitments.

Fiber and other terrestrial options are likely to be the most cost-effective technology in most cases. But excluding satellite completely from universal service programs increases costs, will cause many consumers to wait longer for broadband than they would have otherwise, and makes it more difficult to reduce broadband subsidies in the future.

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